Paperless accounting involves transaction processing that is entirely electronic, with no paper involved in any business process. The intent is to streamline processes, reduce transaction error rates, and eliminate document storage.
However, this is more of a concept than a reality in most organizations. Instead, companies tend to move in the general direction of paperless operations over a period of time by implementing a number of paperless improvements to existing systems. The easiest way to do so is by outsourcing some processes to third parties that have devised paperless solutions. For example:
- Expense reporting. One of the more popular paperless options is to have employees log onto a website that specializes in expense report reimbursement. They enter their expense report information as needed, forward electronic versions of their receipts if requested by the system, and are paid by ACH. No paperwork ever reaches the company.
- Lockbox. Customers can send check payments to a lockbox operated by a company's bank. The bank scans the checks and posts this information to a secure website, which the company cashier accesses each day to extract payment information.
- Payroll. Employees can enter their time worked through an on-line portal, after which the supplier processes payroll and issues an ACH payment to employees.
- Payables. The payables staff can enter payables into a website, designate which items are to be paid, and have the supplier issue ACH payments.
It is also possible to have paperless accounting with internal processes, though this is usually only possible when there is an enterprise-wide system in place. If so, transactions can be initiated in other departments and the system automatically notifies the accounting staff that some action must be taken. For example, the shipping department ships goods, and the software notifies the billing clerk to issue an invoice; no paper-based shipping notice is sent to the billing clerk.
It is also possible to engage in paperless accounting to some extent by scanning documents into an on-line database, which is then linked to specific transactions in the accounting system. However, there can be a considerable amount of labor involved in scanning, and the original documents may still be retained. Consequently, digitization of existing documents does not really address the core concept of paperless accounting, which is to have no documents to begin with.